Air Canada Flies Its First Boeing 777 Aircraft

The new Boeings will provide non-stop service between Toronto and London next month, followed by additional service to Frankfurt, Tokyo and Hong Kong.


MONTREAL (CP) - Air Canada's (TSX:AC.B) strategy to expand its international reach will take flight Saturday as the airline's largest and most efficient aircraft to date makes its maiden flight into Canada, company executives told shareholders Tuesday.

The country's biggest carrier believes the 349-seat Boeing 777 will allow it to serve additional international markets.

''We are truly offering a competitive product that is equal to the best in the world and better than anything in North America,'' CEO Montie Brewer said at the Air Canada's first annual meeting since its public offering of stock last fall.

The two-engine plane replaces the smaller Airbus 340s that have four engines.

''As fuel prices go up, this airplane becomes a better and better buy," Brewer told reporters.

The company spent $347 million on fuel in 2006.

The airline will celebrate the Boeing 777's arrival in Montreal as Air Canada marks its 70th anniversary as a company. Four years ago it teetered on the edge of collapse, weighed down by high operating costs and a huge pension deficit, but has recovered since emerging from court supervision in September 2004.

Air Canada expects to receive eight of the Boeing jumbo jets by year-end and 17 by the end of 2008. It is also purchasing 45 new Embraer 190s as part of a $3-billion acquisition and refurbishment process.

''Air Canada is once again a growing company,'' he told shareholders who gathered at the International Civil Aviation Organization headquarters.

''This will further strengthen an airline that has a solid balance sheet, proven cost control and a strong market position.''

The new Boeings will provide non-stop service between Toronto and London next month, followed by additional service to Frankfurt, Tokyo and Hong Kong. Direct flights between Vancouver and Sydney will begin in December.

Robert Milton, the chairman of the airline and parent ACE Holdings Inc. (TSX:ACE.A), said with high load factors and fuel costs, the ultra-efficient and roomier planes will be appealing to consumers and company accountants.

''I look at it as a big positive and I think it will further the appeal of flying Air Canada and we've been running for a few years basically at uninterrupted record load factors so it's a positive picture,'' he said in an interview.

Brewer said Air Canada will wait until it receives the new long-range 777s in 2009-2010 before deciding whether to return to the competitive market in India.

''We're out of that market until then," he said. ''India is a very important market and we'll probably be back at some point in time.''

Analyst Cameron Doerksen said the new acquisition and refurbishment program is a rebranding of the airline that will appeal to customers.

''They have some positive things coming up, the new fleet is one thing, new route possibilities, the appeal of their new product offerings so there's definitely opportunities for them going forward,'' the Versant Partners analyst said.

While ACE investors have been richly rewarded since the company went public, shares of subsidiaries Air Canada and Jazz Air Income Fund are both trading below their initial prices.

Air Canada's B shares closed at $17.09 Tuesday, down from about $19.50 last fall, while Jazz (TSX:JAZ.UN) has lost about $1 since then to $8.45.

Milton said he's confident Air Canada's share price will increase because of the airline's underlying results.

Jazz Air president and CEO Joseph Randell said unit prices are rebounding after being hit hard by the federal government's decision to tax trusts in four years.

''There was nothing specifically that we could identify which was a catalyst aside from the announcement on the taxation of trusts that really would have driven our unit prices down to the level that they went to,'' he said at a news conference following the regional airline's annual meeting.

Rewards program Aeroplan Income Fund (TSX:AER.UN) held its annual meeting later in the day.

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